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JPMorgan (JPM) to Pay $250M Fine for Internal Control Failings

Zacks Equity Research
·3-min read

JPMorgan JPM has agreed to pay a fine of $250 million for poor risk management and internal controls over the fiduciary business. This is the second time over the last three months that the company is being penalized. Earlier in September, it agreed to pay a penalty of $920 million to settle the probe related to spoofing allegations into its trading of metals futures and Treasury securities.

In a press release, the Office of the Comptroller of the Currency (“OCC”) stated, “the bank’s risk management practices were deficient and it lacked a sufficient framework to avoid conflicts of interest.” The fine has to be paid to the U.S. Treasury.

In a statement, JPMorgan’s spokesperson said, “We are committed to delivering best-in-class controls across our business, and we have invested significantly in and enhanced our controls platform over the last several years to address the issues identified.”

In the consent order, the OCC noted that JPMorgan manages “one of the world’s largest and most complex fiduciary businesses with total fiduciary and related assets of $29.1 trillion, including $1.3 trillion in fiduciary assets and $27.8 trillion of non-fiduciary custody assets.” Additionally, the company offers a wide range of “investment strategies to its fiduciary clients through a variety of investment vehicles.”

However, over the past several years, JPMorgan maintained “a weak management and control framework” for such business activities. Also, the company’s audit process had been deficient and it lacked “internal controls over those activities.”

The company neither accepted nor denied the OCC’s accusations. Further, the regulator noted that JPMorgan has since addressed its shortcomings and doesn’t require making any changes in the way it manages client assets.

Further, similar to JPMorgan, Citigroup C was slapped with a $400-million penalty in October by the OCC for long-standing deficiencies in risk management and internal controls processes. The regulators alleged that the bank has failed to implement effective risk and internal controls measures that complement its size, complexity and risk profile.

Earlier this month, JPMorgan hinted at potential fines related to these issues in the quarterly filings. Nonetheless, the bank hadn’t provided any details at that time.

Shares of JPMorgan have gained 28.7% over the past six months, outperforming the industry’s 16.7% rally.


Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Banks continue to encounter legal probes and are charged with huge sums of money for business malpractices. In October, Goldman Sachs GS admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay more than $1 billion in bribes to Malaysian and Abu Dhabi officials. The company will pay more than $2.9 billion as part of a coordinated resolution with criminal and civil authorities in the United States, the United Kingdom, Singapore, and elsewhere.

Earlier in September, Deutsche Bank’s DB U.S. unit entered into a settlement with The U.S. Department of the Treasury’s Office of Foreign Assets Control, under which the German lender agreed to pay $583,100.

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